Connecticut AG Tong Secures Victory As DOE Withdraws State Energy Funding Cap Policy

The Department of Energy's decision to withdraw the contested policy and abandon its appeal brings to a close a federal court battle that began in August 2025, when Tong and a multistate coalition challenged DOE's new rule limiting reimbursement for administrative and staffing costs to ten percent of a project's total budget. The policy threatened to cut millions of dollars in funding for Connecticut's energy programs.

"This was an unlawful, short-sighted policy concocted to undermine efforts to drive down energy costs and keep us reliant on the fossil fuel industry," Tong said in a statement released Tuesday. The Attorney General characterized the DOE policy as part of what he called "Donald Trump's lawless chaos" and vowed to continue fighting to protect state funding.

The contested "indirect costs" policy would have severely limited how much states could claim for essential administrative expenses in managing federal energy programs. Under the previous system, states could receive full reimbursement for legitimate program administration costs, but the DOE cap would have forced states to absorb those expenses or scale back program operations.

The victory represents the conclusion of a swift legal challenge that saw early success in federal court. In September 2025, just one month after the lawsuit was filed, U.S. District Judge for the District of Oregon ruled in favor of the state coalition and struck down the DOE policy as unlawful, finding that the agency had overstepped its authority.

DOE initially appealed the district court's ruling but has now abandoned that effort, agreeing to both rescind the policy and dismiss the appeal entirely. The complete reversal ensures that states will continue to receive full federal funding for energy programs without the arbitrary ten percent cap on administrative costs.

The successful challenge fits into Tong's broader strategy of using litigation to protect state interests against federal policies he views as harmful to Connecticut. The Attorney General has filed numerous lawsuits challenging federal agency actions, particularly those affecting environmental and energy policy.

With the litigation now concluded and the policy permanently withdrawn, Connecticut and other states can move forward with their energy programs without the uncertainty and funding constraints that the DOE cap would have imposed.